Q4 2024 Gartner Inc Earnings Call
and Nick Colbert.
Speaker Change: Good morning, everyone. Welcome to Gardner's fourth quarter 2024 earnings call. I'm David Cohen, SVP of Investor Relations.
Speaker Change: At this time, all participants are in a listen-only mode. After comments by Gene Hall, Gartner's Chairman and Chief Executive Officer, and Craig Safian, Gartner's Chief Financial Officer, there will be a question and answer session. Please be advised that today's conference is being recorded.
Speaker Change: This call will include a discussion of fourth quarter 2024 financial results and Gardner's outlook for 2025 as disclosed in today's earnings release and earnings supplement both posted to our website, Investor.Gardner.com.
Speaker Change: On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA with adjustments as described in our Earnings Release and Supplement.
Speaker Change: All contract values and associated growth rates we discussed are based on 2024 foreign exchange rates. All growth rates and genes comments are FX neutral unless stated otherwise. All references to share counts are for fully diluted weighted average share counts unless stated otherwise.
Speaker Change: Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the Gartner.com website.
Speaker Change: It's set forth in more detail in today's earnings release. Certain statements made on this column may constitute forward-looking statements.
Speaker Change: Forward looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those containing the company's 2023 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as other filings with the SEC.
Speaker Change: I encourage all of you to review the risk factors listed in these documents. Now, I will turn the call over to Gartner's Chairman and Chief Executive Officer, Gene Hall.
Gene Hall: Good morning, and thanks for joining us today. Gartner continues to remain resilient in a complex environment. In Q4, contract value grew 8%.
Gene Hall: Fourth quarter revenue, EBITDA, EPS, and free cash flow were ahead of expectations.
Gene Hall: In 2024, geopolitical polarization and conflict was the worst in decades.
Supply chains continue to experience major disruptions.
Cybersecurity attacks escalated, becoming even more sophisticated.
Gene Hall: Enterprises remain challenged by how to leverage artificial intelligence while mitigating risk and more.
Speaker Change: Executives across the enterprise are facing greater uncertainty than ever before, and the rate of change continues to accelerate. Leaders know they need help, and I know Gartner is the best source for the insight, guidance, and tools they need to succeed.
Speaker Change: We help our clients make smarter decisions that address their mission-critical priorities while managing risk, saving time, saving money, and building confidence.
Speaker Change: Gartner guides leaders across every size enterprise, in all major geographies, and in every major industry. This includes government. There is no organization that knows more about how to help governments than Gartner.
Speaker Change: We support public sector leaders in 74 countries, including the 30 largest economies except Russia.
Speaker Change: And of course, we know more than anybody in the world about how to leverage technology in the private sector.
Speaker Change: In the U.S., there's a focus on leveraging technology to improve the efficiency and effectiveness of governance.
Speaker Change: We'll apply our insights and best practices to help the U.S. achieve these objectives.
Speaker Change: One topic that continues to challenge leaders across the enterprise is how to harness AI innovation in their environment.
Speaker Change: In the world of artificial intelligence, the pace of innovation is almost impossible to keep up with.
Speaker Change: During our 2024 IT Symposium Conference Series, Gartner analysts discussed ways leaders could successfully pivot from learning AI to scaling AI and pursuing what's next.
Speaker Change: We're helping tens of thousands of executives determine how best to leverage AI in their enterprises.
Research continues to be our largest and most profitable segment.
Speaker Change: Within our research segment, we serve executives and their teams through distinct sales channels. Global Technology Sales, or GTS, serves leaders and their teams within IT. GTS new business grew 13%, with double-digit growth in both enterprise leaders and tech vendors.
Speaker Change: GTS contract value accelerated to 7%, and contract value with tech vendor clients improved for the third consecutive quarter.
Speaker Change: Global Business Sales, or GBS, serves leaders and their teams beyond IT.
Speaker Change: This includes HR, supply chain, finance, marketing, legal, sales, and more. GBS contract value accelerated to 12%, with strong new business growth of 15%.
Speaker Change: Gartner Conferences deliver extraordinarily valuable insights to an engaged and qualified audience. Conferences revenue grew 17% in the fourth quarter and our plan and advanced bookings for 2025 are strong. Gartner Consulting is an extension of Gartner Research.
Speaker Change: Consulting helps clients execute their most strategic initiatives through deeper project-based work.
Consulting is an important complement to our IT research business.
Labor-Based Consulting Revenue Group, 4%
Contract optimization revenue was $50 million, which exceeded expectations.
Speaker Change: Three foundational elements of our long-term success are first, an unrelenting focus on globally consistent execution of Gartner best practices,
Second, a company-wide commitment to continuous improvement and innovation.
Speaker Change: And third, our vibrant culture, which inspires associates to operate and win as a global team.
In closing, Gartner delivered financial results ahead of expectations.
Tech vendors' EV growth continued to accelerate.
Speaker Change: We have a powerful client value proposition and a fast, addressable market opportunity.
Speaker Change: We will continue to create value for our shareholders by providing actionable, objective insight, guidance, and tools to our clients.
Crudently Investing for Future Growth
Speaker Change: and returning capital to our shareholders through our share repurchase program.
Speaker Change: We expect to deliver modest margin expansion over time and will continue to generate significant free cash flow while in excess of net income.
Speaker Change: All of this and more positions us to drive long-term, double-digit revenue growth and sustain our track record of success far into the future.
Speaker Change: With that, I'll hand the call over to our Chief Financial Officer, Craig Safian. Thank you, Gene, and good morning.
Craig Safian: Fourth quarter contract value growth accelerated to almost eight percent. Revenue, EBITDA, adjusted EPS, and free cash flow were better than expected as we continue to execute well in a complex environment.
Craig Safian: Our financial performance for the full year of 2024 included global contract value growth of 8%.
Craig Safian: consolidated revenue growth of 6%, EBITDA of $1.6 billion, diluted adjusted EPS of $14.09, and free cash flow of $1.4 billion.
Craig Safian: We repurchased more than $735 million of stock through December and remain eager to repurchase shares opportunistically. We are introducing 2025 guidance, which we view as achievable, with opportunity for upside.
Craig Safian: Fourth quarter revenue is $1.7 billion, up 8% year-over-year as reported, and FX neutral.
In addition, total contribution margin was 66 percent.
Craig Safian: EBITDA was $417 million, up 8% as reported, and 9% FX-neutral.
Craig Safian: Adjusted EPS was $5.45, up 79% versus Q4 2023. This includes a benefit and a quarter from our tax planning initiatives.
Craig Safian: And free cash flow was $311 million, a very strong finish to the year.
Craig Safian: We ended the quarter with 21,044 associates, up 4% year over year. We have a great team across Gartner, driven by a very compelling associate value proposition.
Craig Safian: Moving into 2025, we are in excellent position from a talent and tenure perspective with a strong hiring plan for the coming year.
Craig Safian: Research revenue in the fourth quarter grew 5% year-over-year, as reported, and 6% FX-neutral. Subscription revenue grew 8% on an FX-neutral basis. Non-subscription revenue was in line with our expectations and guidance.
Craig Safian: Fourth quarter research contribution margin was 74%, consistent with the prior year period.
Craig Safian: For the full year 2024, research revenue increased by 5%, as reported, and FX-neutral. The gross contribution margin for the year was 74%.
Craig Safian: Contract value, or CV, was $5.3 billion at the end of the fourth quarter, up 8% versus the prior year.
Quarterly Net Contract Value Increase, or NCVI, was $220 million.
Craig Safian: As we've discussed in the past, there is notable seasonality in this metric.
Craig Safian: For the fourth quarter, CV from enterprise function leaders across GTS and GBS grew 9%.
CV from tech vendors accelerated for the third consecutive quarter.
Craig Safian: CV Growth was broad-based across practices, industry sectors, company sizes, and geographic regions.
Craig Safian: Across our combined practices, the majority of the industry sectors grew at double-digit or high single-digit rates, led by the healthcare, manufacturing, and public sectors.
Craig Safian: We had high single-digit growth across almost all of our enterprise size categories.
Craig Safian: The small category, which has the largest tech vendor mix, grew mid-single digits.
Craig Safian: We also drove double-digit or high single-digit growth in the majority of our top 10 countries.
Craig Safian: Global technology sales contract value was four billion dollars at the end of the fourth quarter, up seven percent versus the prior year. GTSCV increased 165 million dollars from the third quarter.
Craig Safian: Wallet retention for GTS was 102% for the quarter, reflecting net growth even before the addition of new clients.
Craig Safian: GTS new business increased 13% versus last year with double-digit growth with both enterprise leaders and tech vendors.
Craig Safian: DTS quarterbearing headcount increased 4% year-over-year, consistent with our plan. We added 138 net new sellers in the quarter, the largest sequential increase since Q4 of 2022. We are planning mid-single-digit QBH growth for DTS in 2025.
Craig Safian: A regular, full set of GTS metrics can be found in the earnings supplement.
Craig Safian: Global business sales contract value was $1.2 billion at the end of the fourth quarter, up 12% year-over-year.
Craig Safian: The majority of our GBS practices grew at double-digit rates. Growth was led by finance, sales, and legal.
DVSCV increased $55 million from the third quarter.
Craig Safian: Wallet retention for GBS was 106% for the quarter, reflecting strong net growth with our existing clients.
CBS New Business was up 15% compared to last year.
Craig Safian: GBS quota bearing headcount was up 9% versus the fourth quarter of 2023. We are planning double-digit QBH growth for GBS in 2025. As with GTS, a regular, full set of GBS metrics can be found in our earnings supplement.
Craig Safian: As we do each year at this time, we've provided quarterly historical contract value data updated to 2025 FX rates in the appendix of the earnings supplement.
Craig Safian: The dollar strengthened significantly during 2024 against our major currencies. This resulted in a larger than normal revaluation. As you build your 2025 models, please remember to use the updated data as the baseline for your forecasting.
Craig Safian: Conference's revenue for the fourth quarter was $251 million, up 17% year-over-year.
Craig Safian: Contribution margin in the quarter was 48%, consistent with typical seasonality. We held 13 destination conferences in the quarter, all in person.
Craig Safian: Full year gross contribution margin was 48%. We made investments during the year for conference launches and the expansion of existing conferences.
Craig Safian: Fourth quarter consulting revenue of $153 million increased 19% compared with the fourth quarter of 2023. Consulting contribution margin was 35% in the fourth quarter.
Craig Safian: Labor-based revenue was $104 million, up 4% versus Q4 of last year, as reported and on an FXDigital basis.
Craig Safian: Backlog at December 31st was $192 million, increasing 17% year-over-year on an FX-neutral basis on strength in multi-year contracts.
Craig Safian: We delivered $50 million of contract optimization revenue in Q4. The quarter was very strong, with more and larger deals compared with last year. About $8 million were pulled forward from the first quarter of 2025. Our contract optimization revenue is highly variable.
Craig Safian: Full-year consulting revenue is up 9% on a reported and FX-neutral basis.
Gross Contribution Margin was 36%, compared to 35% in 2023.
Craig Safian: Consolidated cost of services increased 9% year-over-year in the fourth quarter as reported and 8% on an FX neutral basis.
Craig Safian: The biggest driver of the increase was higher headcount to support our future growth.
Craig Safian: SG&A increased 10% year-over-year in the fourth quarter, as reported, and on an FX-neutral basis. SG&A increased in the quarter as a result of headcount growth, mostly in sales.
Craig Safian: EBITDA for the fourth quarter was $417 million, an increase of 8% of reported and 9% on an FX usual basis.
Craig Safian: Fourth quarter EBITDA upside to our guidance primarily reflected stronger than expected revenue performance.
Craig Safian: Even though for the full year was almost 1.6 billion dollars, a 5% increase over 2023 on a reported basis and up 6% FX neutral.
Craig Safian: Depreciation in the quarter of $29 million was up 10% compared to 2023 and similar to Q3. Net interest expense, excluding deferred financing costs in the quarter, was $11 million.
Craig Safian: This was an improvement of $8 million versus the fourth quarter of 2023 due to higher interest income on our cash balances.
Craig Safian: The Q4 adjusted tax rate, which we used for the calculation of adjusted net income, was a benefit of 25% for the quarter as a result of favorable tax planning which took place during the quarter.
Craig Safian: The tax rate for the items used to adjust that income was 32% in Q4.
Craig Safian: The full year tax rate for the calculation of adjusted net income was 10%, again as a result of the favorable tax planning in the fourth quarter.
Craig Safian: Adjusted EPS in Q4 was $5.45, up 79% versus Q4 2023.
Craig Safian: If the adjusted tax rate had been 23%, adjusted EPS in the quarter would have been $3.37.
Craig Safian: We had 78 million shares outstanding in the fourth quarter. This is a reduction of about 1 million shares or about 1% year-over-year. We exited the fourth quarter with just under 78 million shares on an unweighted basis.
Craig Safian: Operating cash flow for the quarter was 335 million dollars, up 50% compared to last year with a working capital timing benefit in the quarter.
Craig Safian: CapEx for Q4 was $24 million, about $4 million less than the prior year.
Craig Safian: Pre-cash flow for the quarter was $311 million, up 59% compared to last year. Pre-cash flow for the full year was almost $1.4 billion, a 31% increase versus 2023.
Craig Safian: There were several items affecting net income and free cash flow during 2024, including after-tax insurance proceeds, a real estate lease termination payment, and tax planning benefits.
Craig Safian: Adjusting for these items, free cash flow for 2024 was 18% of revenue, 74% of EBITDA, and 140% of GAP net income.
Craig Safian: Our free cash flow conversion is generally higher when CV growth is accelerating.
Craig Safian: At the end of the fourth quarter, we had about $1.9 billion of cash.
Our December 31st debt balance was about $2.5 billion.
Craig Safian: Our reported gross debt to trailing 12-month EBITDA was under two times.
Craig Safian: Our expected free cash flow generation, available revolver, and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of share purchases and strategic stuck-in M&A.
Craig Safian: Our balance sheet is very strong, with $2.6 billion of liquidity, low levels of leverage, and effectively fixed interest rates.
Craig Safian: We repurchased $102 million of stock during the fourth quarter and more than $735 million for the full year.
Craig Safian: At the end of December, we had more than $900 million of authorization for repurchases remaining, and we expect the Board will continue to refresh the repurchase authorization going forward.
Craig Safian: As we continue to repurchase shares, our capital base will shrink. Over time, this is accretive to earnings per share, and combined with growing profits, also delivers increasing returns on invested capital.
Craig Safian: Before providing the 2025 guidance details, I want to discuss our base level assumptions and planning philosophy for 2025.
Craig Safian: As you know, the U.S. dollar has strengthened significantly. We expect FX will be around a 2 percentage point headwind to revenue and EBITDA growth for the full year.
Craig Safian: For research, we continue to innovate and provide a very compelling value proposition for clients and prospects.
Craig Safian: The outlook for 2025 research revenue growth is a function of three primary factors.
Craig Safian: First, 2024 ending contract value. Second, the timing and slope of the continued CV acceleration. And third, the performance of non-subscription revenue.
Craig Safian: Starting with research subscription revenue, which was 77% of 2024 consolidated revenue. Our guidance reflects CV continuing to accelerate during 2025.
Craig Safian: First Quarter and First Half NCVI are important inputs to calendar 2025 revenue growth.
Craig Safian: We have taken a prudent view of NCVI phasing because Q1 is a seasonally important quarter for renewals.
Craig Safian: With the U.S. federal government, we ended 2024 with around $270 million of CV, which is 5% of the total.
Our contracts are spread widely across agencies and departments.
Around 85% of U.S. federal CV is in GTS.
Craig Safian: Almost all the U.S. federal contracts are for one year, with renewals spread across the year.
Craig Safian: We offer a very compelling value proposition for our public sector clients.
Craig Safian: As Gene discussed, we help government function leaders address their mission-critical priorities.
Craig Safian: Potential government changes may affect our business in the short term.
Craig Safian: We will continue to provide great sales, service, and research levels to our clients. This will position us to drive strong growth over time.
Craig Safian: The non-subscription part of the research segment was about 5% of consolidated revenue in 2024.
Craig Safian: We built into the guidance a continuation of second-half traffic trends.
Craig Safian: If the underlying fundamentals of this portion of the segment improve, we'll be able to increase the full year outlook.
Craig Safian: For conferences, which was about 9% of 2024 revenue, we are basing our guidance on the 53 in-person destination conferences we have planned for 2025.
Craig Safian: We expect similar seasonality to what we saw in 2024, with Q4 the largest quarter, followed by Q2.
Craig Safian: We expect gross mortgages in the second quarter to be the highest of the year for the confidence segment.
Craig Safian: We have very good visibility into 2025 revenue with a majority of what we've guided already under contract. This is consistent with last year.
Craig Safian: For consulting, which was also about 9% of 2024 revenue, we have more visibility into the first half based on the composition of our backlog and pipeline as usual.
Contract optimization has had several very strong years.
Craig Safian: It's seasonally slower in the first quarter, we've pulled forward about $8 million into Q4, and the business remains highly variable.
Craig Safian: We've incorporated a prudent outlook for this part of the segment.
Craig Safian: Our base level assumptions for consolidated expenses reflect the run rate from the second half 2024 hiring and the growth hiring we have planned for 2025.
Craig Safian: Beyond the hiring factors, we recommend thinking about expenses sequentially with notable seasonality driven by the conference's calendar and annual merit increases.
Craig Safian: Our plan for mid to high single-digit sales headcount growth for 2025 reflects our commitment to invest for future growth while delivering strong margins and free cash flow.
For TTS, we expect mid-single-digit QBH growth again in 2025.
Craig Safian: We have the capacity we need for the tech vendor part of the business for now, and we're going to be thoughtful about our public sector hiring in the short term.
Craig Safian: For GBS, we plan to grow QBH double digits this year. We have the recruiting capacity to go faster depending on how the year plays out.
Craig Safian: The most important way we invest for long-term sustained double-digit growth is by increasing our sales headcount.
This is an essential part of our 2025 operating plan.
Our guidance for 2025 is as follows.
Craig Safian: We expect research revenue of at least $5.365 billion, which is FX-neutral growth of about 6%.
Craig Safian: The guidance reflects FX-neutral research subscription revenue growth near 8%, consistent with 2024 CV growth.
Craig Safian: We expect conferences revenue of at least $625 billion, which is FX mutual growth of about 10%.
Craig Safian: We expect consulting revenue of at least $565 million, which is FX-neutral growth of about 2%.
Craig Safian: The result is an outlook for consolidated revenue of at least $6.555 billion, which is FX-neutral growth of 6%.
We expect full year EBITDA of at least $1.51 billion.
Craig Safian: On a reported basis, we expect an EBITDA margin of at least 23%.
Craig Safian: Compared with 2024 margins, this factors in FX, 2024 headcount additions, 2025 growth hiring, and a prudent approach to the plan.
Craig Safian: We expect 2025 adjusted EPS of at least $11.45 per share.
Craig Safian: For 2025, we expect free cash flow of at least $1.14 billion.
Craig Safian: This reflects a conversion from gap in income of about 140%.
Craig Safian: Our guidance is based on 78 million shares, which only assumes repurchases to offset deletion.
Craig Safian: Finally, for the first quarter of 2025, we expect to deliver EBITDA of at least $345 million.
Craig Safian: We performed well in 2024 despite continuing global macrouncertainty in a dynamic tech vendor market.
We finish the year with high single-digit CV growth.
Craig Safian: Revenue, EBITDA, EPS, and free cash flow performance exceeded our expectations and the guidance we set a year ago.
Craig Safian: We remain eager to return excess capital to our shareholders. We will continue to be price sensitive, opportunistic, and disciplined. Looking out over the medium term, our financial model and expectations are unchanged.
Craig Safian: With 12-16% research CV growth, we will deliver double-digit revenue growth.
Craig Safian: With gross margin expansion, sales cost growing about in line with CV growth, and G&A leverage, we will expand EBITDA margins modestly over time.
Craig Safian: We can grow free cash flow at least as fast as EBITDA because of our modest CapEx needs and the benefits of our clients paying us up front.
Craig Safian: And we'll continue to deploy our capital on share purchases, which will lower the share cut over time, and on strategic value-enhancing tuck-in M&A. With that, I'll turn the call back over to the operator, and we'll be happy to take your questions. Operator?
Speaker Change: Thank you. As a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again.
Please stand by, we compile the Q&A roster.
Speaker Change: And our first question will come from Jeff Mueller from Robert W. Baird. Your line is open.
Jeff Mueller: Yeah, thank you. Good morning. You gave us a lot of perspective, but I'm still trying to tie some of the things you gave us together. A 7.8% Q4 CP exit rate.
Speaker Change: you have an easier comp to begin the year and that flows through while the revenue of CV does well then. Just are you seeing anything from the renewal risk heat map perspective?
Speaker Change: Or are you hearing things from the U.S. federal government salespeople or seeing something in those renewal trends on the ground yet? Or just anything you're trying to signal beyond the prudence in the guidance assumptions to tie those those figures together?
Hey, good morning, Jeff.
Speaker Change: forward year subscription revenue growth is going to be the end of the year prior year CV growth and that sort of determines
Speaker Change: you know call it 80 to 85 percent of how much revenue actually flows through into the following year. The other important part which we talked about a little bit during the prepared remarks is the phasing of our NCBI quarter to quarter to quarter.
And as we mentioned, Q1 is a heavy renewal quarter.
A little bit heavier than average
and it is our lowest new business quarter.
Speaker Change: and so we generally take a pretty prudent approach to how we plan for Q1 and Q2 and CVI. And those, you know, Q1 and Q2 are the quarters that can materially move the revenue up or down depending on the performance.
Speaker Change: And so what you're looking at is sort of, I would characterize as sort of a normal flow.
of ending contract value growth.
Speaker Change: flowing into 2025. And then, you know, our quote unquote normal expectations for first half NCBI rolling into that around 8% constant currency subscription revenue growth for 2025.
Speaker Change: And then on 2025 margin guidance, I hear you on opportunity for upside, but.
Speaker Change: and I ask because it sounds like you're still re-accelerating sales headcount, still re-implementing growth investment, and you're not going to be fully back to the medium-term growth framework for GTS quarter bearing headcount in terms of the growth rate yet in 2025. So are we still likely going to be talking about
Speaker Change: I guess needing to annualize that spend a year from now, or is 2025 kind of the final margin reset? Thank you.
Speaker Change: Thanks, Jeff. So, you know, I'd like to say yes. I don't know what the year has in store for us in terms of
Speaker Change: the dynamism of the environment that we're operating in. But one way to step back and think about it is, the implied operating expense growth that we have baked into our 2025 plan and guide is around 9 percent year-over-year operating expense.
And that encompasses
Speaker Change: you know, the growth we brought on board in 2024, particularly from a QVH perspective, but across the company, and the growth we have planned for 2025 with more normal phasing of that hiring.
Speaker Change: And so if revenue, you know, and again, and we have modeled in our CV growth rate accelerating over the course of 2025. And so if 2025 ends up being a more, quote unquote, again, normal year, yes, I would say 2025 could be the new baseline. But again, given the dynamic world in which we operate, it's hard to call that right this moment.
Fair enough. Thank you.
Thank you.
Speaker Change: And our next question will come from Tony Kaplan from Morgan Stanley. Your line is open.
Tony Kaplan: Thanks so much. I caught the part in the prepared remarks where tech vendor growth continued to accelerate in the quarter. I know last year we had that first quarter dynamic, but wanted to understand, are we in a place where a tech vendor
Tony Kaplan: Is a non-issue now for this year and should we expect to see accelerating growth throughout the year?
Tony Kaplan: So, hi Tony, the tech vendor market has recovered nicely and we are as well as we expected to return to a more normal-like state over the next several quarters, and so I think it's good. We expect to continue to accelerate through the year.
Speaker Change: Great. And then I think one of the questions that people have been asking recently is
Speaker Change: on the buyback. So, Craig, could you just remind us what goes into your decision-making process on that and any thoughts about, I know you mentioned in the guide, you're only really
Speaker Change: for dilution, but to the extent that you have a lot of, you know, excess cash on the balance sheet, your leverage level's below where your target is. Just wanna understand,
Speaker Change: whether we could see upside to that, that buyback guide. Thanks.
Speaker Change: Thank you, Tony. So I'll start, philosophically, we want to make sure that we deploy our capital on shareholder value-enhancing initiatives. One of those initiatives that we know delivers great returns over the long term is returning capital to our shareholders through our buyback programs.
Speaker Change: and we remain committed to deploying our capital in smart ways, whether it be through the Buy Back program or through strategic value-enhancing tuck-in M&A.
Speaker Change: On the buyback side, again, just zooming back for a moment, we bought back, you know, north of $700 million.
Speaker Change: in 2024, over the past four years, it's been over $4 billion. And so I think we've proven that, yes, we are more than willing to put our money to work, capital to work, and free cash flow to work on behalf of our shareholders.
That said...
Speaker Change: We don't want to just be in the market buying blindly. We have a philosophy of being price sensitive, opportunistic, and disciplined.
Speaker Change: And when we see an opportunity to go big, when there is a disruption either in the market, or in the share price, or in the sector, or whatever it may be, we are ready to go big.
Speaker Change: We were able to, you know, repurchase over $700 million of stock last year at attractive prices because we followed that philosophy.
Speaker Change: And so going forward, you know, as I mentioned on Jeff's question, the world's a pretty dynamic place.
Speaker Change: and volatile plays. And so that should give us opportunities to get into the market and be more aggressive, but we're not going to deviate from our overall philosophy of being price sensitive, opportunistic and disciplined.
Thank you so much.
Thank you.
Speaker Change: Our next question will come from Faisal Alwi from Deutsche Bank. Your line is open.
Speaker Change: First, I wanted to ask about the public sector. You said that you are going to be thoughtful about public sector hiring in the short term.
Speaker Change: And I know you've talked about, you know, the value proposition for the public sector, obviously, there's been a lot in the news, just give us a bit more color. And thank you for, you know, the quantification there, but give us a bit more color about
Speaker Change: how you're tactically approaching the public sector just in light of the dynamic environment there.
Speaker Change: So let me start. The public sector for us encompasses federal governments, state governments, local governments in 74 countries around the world. So when it comes to public sector, we're actually incredibly diversified in terms of where public sector comes from.
Speaker Change: and you know we help among the most advanced governments in the world with their service, delivering better services to their citizens.
Speaker Change: and we're an essential service for them. And so we're gonna continue doing that. And so as we look at the public sector, if you think about it as being not just like US government, but being actually 74 countries and federal, state, local, all of whom technology is just as important as for the commercial sector.
Speaker Change: and so we see it as a very vibrant sector first overall that we expect to you know to continue to do very well with us.
Thank you very much.
Speaker Change: Okay, understood. And then you talked about 1Q being, you know, like a higher renewal quarter for you. Give us some perspective on, you know, how much, is that across the board? Is that, you know, were you talking specifically about, you know, tech lenders or GTS or, you know, is it across the board? Yeah, hi, it's Craig. So, our
Renewals are phased pretty evenly throughout the year.
Craig Safian: But it's not 25-25-25-25. And so Q1 happens to be a little bit higher than the 25% mark. And as I mentioned earlier,
Craig Safian: And as we roll into Q1, it tends to be our lightest new business quarter. So it's really the dynamic of...
Craig Safian: slightly higher than average amount of renewals in the quarter and seasonally our lowest new business quarter that, you know, causes us to make sure that we're thoughtful about the Q1 and CVI that we build into our revenue plan.
Got it, thank you.
Thank you.
Speaker Change: Our next question will come from Andrew Nicholas from William Blair. Your line is open.
Andrew Nicholas: Hi, good morning. First question, I just kind of wanted to circle back on the government piece. I understand it's not a massive part of the business and you're optimistic about the opportunity medium and long term, but can you just clarify, like, are you are you already getting feedback?
Speaker Change: from that part of your business that the renewal cycle will be
Speaker Change: choppy, I think you mentioned, those are generally one year contracts or, or is it just kind of reacting to news flow and being a bit more cautious, just not sure if it's if it's tangible to this point, or goes back to a typically conservative approach.
Speaker Change: So if I look again, if I look at our total business,
Speaker Change: federal state, local, we're highly diverse, so I know change there. If I zoom in just on the US public sector, I'd say we're seeing the same, the trends we're seeing now are the same trends we saw in Q4, there's no change. And that could change in the future, but as we sit here today, there's no trends, no difference from what we saw in Q4.
Speaker Change: in terms of new models, new capabilities. Any update to how you're thinking about your ability to leverage that technology within your business?
become more efficient.
Speaker Change: and generate more content, whatever it may be. Any updated thoughts there would be great. Thank you.
Speaker Change: So, AI is fantastic for us. If I start with our clients, and I'll come back to us, but if I start with our clients, it's one of the biggest areas of uncertainty. There's a lot of expectation. It can provide a lot of productivity growth, future growth for our clients.
Speaker Change: and we're the best position in the world to help our clients sort this out both on the enterprise function leader side as well as on the tech vendor side.
Speaker Change: Within Gartner in particular, we have, you know, in the range of tens of different kinds of initiatives.
Speaker Change: where we're applying AI, generative AI, but other kinds of AI as well, and it ranges from advanced statistical techniques
with some types of AI to using generative AI for...
Speaker Change: things like training, as well as in some of our client-facing, do we think of translations and things like that.
Speaker Change: And so we've got like many, as I said, you know, tens of applications we're using it. No single application is going to be like improved productivity 50%.
Speaker Change: Each of these are going to be like small little things. Some will work out and be great and maybe great meaning like they'll give us a 5% productivity improvement and some will try and we'll find actually if they don't have a big impact and move on to the next one.
Speaker Change: And so we're seeing it as, you know, sort of, we have a strategy of continuous improvement, continuous innovation.
Speaker Change: AI and generative AI both are just another piece of our continuous innovation, continuous improvement strategy.
Speaker Change: So again, it won't be transformational, but it'll help us continue to improve our effectiveness over time, both with clients. But the big issue, the big advantage for us is not on that internal side. It's really about helping clients figure out how to use it in their business, which is
and others.
Thank you.
Thank you.
Speaker Change: Our next question will come from Manav Patnik from Barclays. Your line is open.
Manav Patnik: Thank you. Good morning. Gene, I was just wondering in terms of GTS, right? I think you talked about in your prepared remarks how sales growth is very important to your long-term double-digit growth and you know you're doing that in GTS. I was just wondering in GTS, why only mid-single digits? What kind of environment or what does it take for you to get back to the double-digit salesforce growth on the GTS side?
Manav Patnik: in addition to growing headcount. And so the reason we're growing GTS headcount modestly slower than we want to do over the medium term is that we believe we can get growth out of productivity, particularly on the tech vendor side of our business.
Thank you.
Manav Patnik: We think we can do both, get improved productivity and grow headcount.
Speaker Change: Okay, fair enough. And then, Craig, just in terms of, you know, being opportunistic on the buybacks.
Speaker Change: Is it really just the, you know, I guess your interpretation of if the stock is cheap or not, but just besides that, is there any, you know, deal pipeline or anything of that nature that might be part of why you're holding back as well?
You know, we're in a position where
Speaker Change: because of the excess cash we have on the balance sheet, balance sheet flexibility, and the billion plus dollars of free cash flow that we generate each year. It's an and question, not an or question for us in terms of buybacks or M&A. I would not read anything into our opportunism and discipline around our buyback program and M&A pipeline.
Speaker Change: And again, and I think the other thing I would just, you know, highlight is the bulk or, you know, virtually all of our M&A targets, I would characterize as small to medium kind of tuck-in acquisitions, nothing big transformational like we did eight years ago.
Got it. Thank you.
Speaker Change: Thank you. Our next question will come from Surrender Thin from Jeffrey's LLC. Your line is open.
Surrender Thin: Thank you. Gene, just a big picture question here is, if you think about tech vendor and maybe the cyclicality in that part of the business,
Surrender Thin: How do you think about that on a go-forward basis in the sense of how unusual do you think this cycle has been? And if I interpret your comments correctly, it sounds like tech vendors should be back to normalized growth by the end of 2025, and if so, what does normalized growth for that business look like?
Surrender Thin: So I think the period that we've been through over the last three or four years has been pretty extraordinarily in the tech sector.
Surrender Thin: It went up by a whole number of multiples, I think three to four times, and so there was a, you know, from my view, an unusually large, I'll call it bubble, of venture capital spending, which then drove a kind of bubble with all those tech companies.
Surrender Thin: I can't recall that happening, and I don't see that happening.
Surrender Thin: Ed. And beginning, end, anything could happen. But I do think that was very unusual. You look at, you know, 20 years prior to that we didn't see that we saw ups and downs but not anything like that. So I would expect it to be anywhere near as cyclical.
Surrender Thin: The other thing that happened then, too, is it wasn't just cyclical. There was a shift in energy efficiency.
Surrender Thin: what the venture capital firms were investing in that happened simultaneously. So a lot of the investments they made then were not in AI, and now there's a big focus in AI, and so there's a big shift going on from companies that used to get funding four years ago, or three years ago, that today can't get funding, and a different set of companies now that are hitting this.
Funding.
Surrender Thin: That's all twice. I think a very that's not a usual event if you look back over the last 20 years And in two other thoughts there surrenders. So one, you know, we think about our medium-term objective for Research and CV growth. It's 12 to 16 percent and that's across the entire GTS and GBS portfolio Inclusive of TechVendor and if you go back historically TechVendor has grown in that range year after year after year after year And so I do think you know the most recent
David Cohen, Craig Safian
Surrender Thin: cycle has been abnormal or atypical. The other thing, just to clarify, I think what Gene said is returning to normal growth over the next several quarters. He wasn't pegging end of year or anything like that. So we expect our tech vendor CV to continue to accelerate. It has accelerated these past three quarters, and will continue to accelerate into 26 and beyond.
Speaker Change: That's helpful. And then maybe just on the the non-subscription lead gen part of the business.
Speaker Change: Can you maybe talk about where you believe you are in that part of the strategic shift, maybe how demand pricing has evolved versus the expectations of the last year and where you think it's going to head to or what's in the assumptions for 2025?
So I'll start with kind of where the business is
Speaker Change: So, the business went through, in fact, it was impacted by the same things we just saw earlier with this, what I will call, tech bubble, and we're kind of, I think, getting, working our way through all of those, and I think the business will then normalize and be back to kind of normal where both traffic, conversion traffic, and pricing then stabilizes again over the next few quarters.
Got it. Thank you.
Thank you.
Speaker Change: Our next question will come from Josh Chan from UBS. Your line is open.
Josh Chan: Hi, good morning, Gene and Craig. I was wondering if you could talk about the selling environment. I noticed that the the GTS wallet retention improved nicely this quarter, so I wonder if any change you've noticed there in terms of selling and renewals. Thank you.
Gene Hall: So I would say the selling environment is unchanged, but our level of execution continues to improve. So I think the improvement you've seen across the business is due to improved execution on our part.
Speaker Change: Okay, that's great. Thank you. And then on your comment about the Q1 renewal prudence,
Speaker Change: I think last year you had slightly negative NCVI in Q1, but that was because tech vendors were in a much tougher spot. And so I guess with tech vendors seemingly getting better this year, can we roll out negative NCVI in Q1? I guess, would you care to comment on that?
Speaker Change: Yeah, we don't guide on CV and we're not going to guide on Q1 and we're only one month into the cycle. I would just emphasize that the world is a very dynamic place.
Thank you.
Speaker Change: we are fighting for every new business win and every renewal rate like we always do. We are executing better, as Gene mentioned, than we had four quarters ago, six quarters ago, eight quarters ago, and we'll continue to do that. We'll update you on Q1 in April or early May.
Great. Thank you and good luck in Q1. Thank you.
Speaker Change: Thank you. Our next question will come from George Tong from Goldman Sachs. Your line is open.
George Tong: Hi, thanks. Good morning. This sort of builds on the prior question, but you talked about taking a prudent view of NCVI phasing since 20Q is a heavier renewal quarter and lower new business quarter. Can you talk about some of the top internal or external swing factors that you're watching that could affect how NCVI comes in?
You know it's
George Tong: The normal stuff George, so obviously, you know, we have a global business
George Tong: that operates, you know, with the largest companies in the world down to smaller companies. We've got small tech vendor baked in there. We obviously have our public sector business and some level of U.S. Fed renewables in the first quarter. So there's always large swing factors. Last year was a bit unique in that we had
several
George Tong: very large tech vendor renewals where we knew the situations were going to be challenging. So they're either like large
George Tong: You know, M&A, closing, and us having to deal with the ramifications of that, or large layoffs announced in the throes of us going through the renewal process.
George Tong: So we don't have that to the same extent that we did last year, but we're talking about thousands and thousands of deals.
George Tong: that our teams are working both from a research perspective, a service perspective, a real perspective, and a growth perspective over the course of the quarter. And so any of those.
George Tong: you know, underneath the covers can drive the overall NCBI and CV growth, you know, up or down a little bit.
Speaker Change: Got it. That's helpful context. And then you're planning to increase sales headcount mid-single digits in GTS and double digits in GBS this year. Can you talk about the phasing of this hiring if it's going to be front-end loaded or back-end loaded or perhaps evenly distributed across the year?
Speaker Change: Yeah, it's a great question, George. So, you know, I think in 2024, almost all of our growth hiring or the net increase in quarter bearing headcount was back-end loaded. In 2025, current plan is for it to be more evenly spread throughout the year. The one thing I would note, though, is, you know,
Speaker Change: The number can bounce around a little bit quarter to quarter. We're not necessarily hiring to a deadline of we must have you on board by midnight on March 31st so we can hit our numbers. We are much more pragmatic.
Speaker Change: growth quarter, not hiring quarter, but net growth quarter, because that's when we do all our promotions and then we backfill them. We often backfill a lot of them in advance in the fourth quarter. We also tend to see a little bit higher turnover in the first quarter, because if people didn't earn money in 2024, they often opt out and leave and look for a greater pass through somewhere else in the first quarter. So there can be a little bit of...
Speaker Change: volatility in the numbers for all those reasons, but we would anticipate not being nearly as back-end loaded in 2025 as we were in 2020.
Very helpful. Thank you.
Thank you.
Jeff Silber: And our next question will come from Jeff Silber from BMO Capital Markets. Your line is open.
Jeff Silber: Thanks so much for squeezing me in. I wanted to ask about pricing. If I remember correctly, you take price increases in the beginning of November, and I think you said it was roughly 4%. Is that, you know, across the board, is it different by product and geography? And I'm just wondering, did you get any pushback this year greater than normal?
I hate you. Good morning.
Speaker Change: as well, because as we've talked about philosophically, we want to make sure that our pricing at least offsets what our expectation is.
Speaker Change: from a wage inflation perspective, so it is not a broad paintbrush. We're actually very laser focused on making sure that we're taking the pricing up the right amount, in the right places, in the right currencies.
Speaker Change: And then, you know, in terms of pushback, it's been the standard price increase. So nothing of new related pushback, I think.
Speaker Change: You know, we're very focused on making sure that we are constantly improving our delivery and our products, and that justifies the very modest price increase that we put on top for our clients each year.
Speaker Change: All right, that's really helpful. If I could shift gears, maybe just talk about some different geographies. I think you said that the growth was broad-based, but I'm really curious specifically in Europe and China what the trends were there. Thanks.
Yeah, so it's Europe, the selling environment in Europe
is basically being pretty, pretty consistent.
Speaker Change: from what we saw in the second half of 2024. So nothing or no news to report there. On the China side has been pretty challenging, especially with larger clients there in China. What I would say is we've had some success and seen some improvement in selling to like a tier below that over the second half of the year,
Speaker Change: largely consistent, uh, our performance, you know, over the course of 2024.
All right. Thanks so much for the call.
Thank you.
Speaker Change: Our next question will come from Jason Haas from Wells Fargo. Your line is open.
Good morning and thank you for taking my questions.
Speaker Change: I saw that GCS productivity improved from 3.3 to 4.3, despite the fact that you increased headcount, which I know can be difficult to drive. And then you made some comments earlier about better execution, so I was curious if you could provide some more color on that in terms of, you know, what changes you've made and how you've been able to drive that. Thank you.
Speaker Change: So education, it's basically the normal stuff, which is we're very focused on making sure we hire the right people And when we get the right people that we give them great training, and so we're constantly improving our recruiting processes
Speaker Change: We also are constantly improving our training. We have a big focus on training. And then again, if I look at the tools we provide our sales force, we're always innovating those tools. And those are always taken to another level, literally quarter by quarter. And so it's basically who we recruit, how we train them, and the tools we give our sales people.
Speaker Change: Got it. That's helpful. And then there was also a comment earlier about an expectation, and I know you don't go out to CV, but there's a comment about an expectation that CV growth would continue to accelerate. So, if you could put a finer point on that. Are you saying that the 7.8% that you reported in 4Q, is that expected to be the bottom here, and each quarter should be above that, or could it potentially be a more sort of rough path from here?
Speaker Change: Hey Jason, I think the comment is more that over the course of
Speaker Change: 2025, and when we exit 2025, we would expect to be higher than 7.8%.
Yeah, as we've talked about in the past,
Got it. That's very helpful. Thank you.
Speaker Change: Thank you. And I am showing no further questions from our phone lines. I'd now like to turn the call back over to Jean Hall for any closing remarks.
Gene Hall: So here's what I'd like you to take away from today's call. Gartner delivers financial results ahead of expectations.
TechVendorCV growth continues to accelerate.
Gene Hall: We have a vast addressable market opportunity with a strong and compelling value proposition.
Gene Hall: Looking ahead, we're well-positioned to drive sustained double-digit revenue growth over the long term.
Gene Hall: We'll continue to create value for our shareholders by providing actual, objective insight, guidance, and tools to our clients.
Gene Hall: Prudently investing for future growth, generating free cash flow, well in access to net income, and returning capital to our shareholders for our repurchase program. Thanks for joining us today and we look forward to updating you again next quarter.
Gene Hall: Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
Speaker Change: Copyright © 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.
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David Cohen November 9, 2003 American Heart Association
Speaker Change: Come and go as the real Treibt come and go as David Come and go as the real David Hollink